About 35 million families will receive money from this year’s expanded child tax credit on Friday, as the IRS distributes the fourth monthly payment.
These “family stimulus checks” began in July to give households with children a little extra help with grocery shopping, covering household bills or paying off debt.
But some people who report having one or more children as dependents might be wise to withdraw from their final payments and collect the money next year at tax time instead. If the following reasons apply to you, you will want to opt out quickly.
Reminder of how the tax credit works
The strengthened child tax credit was one of the COVID relief measures in President Joe Biden’s $ 1.9 billion March economic stimulus package.
For each child aged 6 to 17, households receive up to $ 3,000, and children under 6 net up to $ 3,600 for their family.
The IRS pays half of the tax credit through monthly checks or bank deposits of up to $ 300 from July to December, on or around the 15th of the month. The other half will be available to parents as a refund when they file their taxes next spring.
Couples earning $ 150,000 or less, or individuals earning up to $ 75,000, are eligible for maximum payments. People who earn more and who are usually eligible for a child tax credit benefit from reduced advance payments.
Most parents didn’t have to do anything to receive their money, but some low-income households that typically don’t produce taxes need to register for the credit through the Tax Credit Update Portal. IRS children.
And this is where you can opt out of advance payments as well.
Reasons you might want to opt out
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Even if you have already received payments, the government allows you to ignore the latest ones.
Because monthly checks work like advance payments on the tax credit that you would normally receive from your 2021 tax return, every dollar you receive now reduces the amount you can get back next year.
Credit eligibility is based on your most recent tax return, which is 2020 for many people.
If your circumstances have changed in the past year, your income has increased, or someone new has declared your child as a dependent, you could find yourself facing a big tax bill next year.
In these cases, withdrawing the child credit advance payments for the remainder of 2021 could help offset what you owe the IRS.
Or, some families who can afford to live without their monthly checks may decide they prefer to receive a big refund check to help cover household expenses or just to splurge on something fun year round. next.
But time is limited to retire
For each monthly payment, the IRS sets a deadline for parents to update their preferences or personal information. It is too late to say “no thanks” to the October 15th payment – the deadline was October 4th.
But you still have time to unsubscribe from the last two checks. The deadline to access the Child Tax Credit Update Portal to decline November 15 and December 15 payments is November 1.
The IRS provides an FAQ guide on why you might want to opt out.
And with married couples, the IRS has made it clear that both spouses must opt out. If only one of the spouses withdraws, the household will still receive monthly payments, but for half of the normal amount.
What to do if you need a little extra stimulus
If you’re still running out despite monthly tax credit payments, or if your household isn’t receiving them because you retired or earned too much to qualify, here are some ideas for essentially creating your own family stimulus Check. .
- Manage your debt. Credit cards can be convenient, but they also come with high interest rates. If you are under your load, solve it by folding your balances into one debt consolidation loan. You will only have one payment to expect, and the lower interest rate will reduce the cost of your debt.
- Swap your mortgage for a cheaper model. If you own your home and haven’t refinanced in the past year, what are you waiting for? A recent Zillow survey found that nearly half of homeowners who took advantage of the lowest mortgage rates in the pandemic are saving $ 300 a month or more. Thirty-year mortgage rates are below 3% again, so collect several mortgage refi offers and see how much you could save.
- Lower your insurance costs. You could easily be paying hundreds of dollars too much for auto insurance each year if you haven’t looked for a better rate lately. A little price comparison could help you find a much cheaper policy. And you can use the same strategy when it comes to renewing or purchasing home insurance.
- Turn your money into a wallet. You don’t need to have a lot of money to get returns in today’s scorching stock market. In fact, a popular app can help you invest just your “spare currency” from daily purchases in a diversified portfolio.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.